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OFAC, Office of Foreign Assets Control, Homeland Security, Acts & Compliance, Searches and Information and Background
The Office of Foreign Assets Control (“OFAC”) of the U.S. Dept. of the Treasury enforces economic and trade sanctions based on foreign policy and national security goals. OFAC blocks interaction with terrorists, international narcotics traffickers and weapons violators, among others, as well as denying dealings with certain foreign entities.
The penalties for violations can be substantial. Depending on the program, criminal penalties can include fines ranging from $50,000 to $10,000,000 and imprisonment ranging from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $11,000 to $1,000,000 for each violation.
Search First can guide you through OFAC compliance. Our OFAC search is designed to provide our clients with the most in-depth and detailed security searches available. When the stakes are high, don’t get minimal OFAC information, get the whole story. Talk to one of our representatives to understand why not all OFAC searches are created equal. Understanding the difference can reduce your risk. We go above and beyond to protect your interests. A SearchFirst OFAC Search is more than just the OFAC database; we include checks against the following lists:
- OFAC listing
- England List
- UN list
- Canada List
- World Bank List
- US Bureau List
- DTC List
- FBI List
- Foreign Chiefs and Diplomats List
- European List
- Interpol List
General Questions on OFAC
The Office of Foreign Assets Control (OFAC) has on its web site answers to questions of general applicability frequently asked by the public. Some of the more frequently asked questions are listed below:
For further assistance call SearchFirst or call OFAC’s Compliance Programs Division at 202-622-2490 or OFAC’s Licensing Division at 202-622-2480 or write to the Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, N.W., Washington, D.C. 20220.
What is OFAC and what does it do?
The Office of Foreign Assets Control administers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.
How long has OFAC been around? How did the OFAC come into being?
The Treasury Department has a long history of dealing with sanctions. Prior to the War of 1812, Secretary of the Treasury Gallatin administered sanctions imposed against Great Britain for the harassment of American sailors. In 1861, during the Civil War, Congress passed a “Trading With the Enemy Act,” which prohibited transactions with the Confederacy, called for the forfeiture of goods involved in such trade, and provided a licensing regime under rules and regulations administered by Treasury. The Trading With the Enemy Act of 1917 (“TWEA”) made that Civil War legislation “modern” for World War I. OFAC is the successor organization to the Office of Foreign Funds Control (the “OFFC”), which was established at the advent of World War II following the German invasion of Norway in 1940. The OFFC’s initial objective in acting under TWEA was to prevent Nazi use of occupied countries’ holdings of foreign exchange and to prevent forced repatriation of funds belonging to nationals of those countries. These controls were later extended to protect assets of other invaded countries. After the United States formally entered World War II, the OFFC became the major American program of economic warfare against the Axis powers, blocking enemy assets and prohibiting foreign trade and financial transactions. Those assets would also serve as a future source of war reparations. The OFFC program was administered by the Secretary of the Treasury throughout the war. After the cessation of hostilities, most foreign property subject to protective blocking was gradually released by licenses under the Foreign Funds Control Regulations. Most enemy property was vested by the U.S. Government during and immediately after the war. Responsibility for administering the FFC Regulations was transferred to the Attorney General (Office of Alien Property), effective October 1, 1948. All matters relating to the World War II vesting program remain at the Justice Department under the supervision of the Office of Alien Property Custodian. OFAC itself was formally created in December 1950, following the entry of China into the Korean War, when President Truman declared a national emergency under TWEA and blocked all Chinese and North Korean assets subject to U.S. jurisdiction.
What does one mean by the term “prohibited transactions” ?
Prohibited transactions are trade or financial transactions and other dealings in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute. Because each program is based on different foreign policy and national security goals, prohibitions may vary between programs.
Are there exceptions to the prohibitions?
Yes. OFAC regulations often provide general licenses authorizing the performance of certain categories of transactions. In addition, in some circumstances, U.S. law exempts certain transactions from embargoes. OFAC also issues specific licenses on a case-by-case basis under certain limited situations and conditions. Guidance on how to request a specific license is found at 31 C.F.R. 501.802.
What do you mean by “blocking?”
Another word for it is “freezing.” It is simply a way of controlling targeted property. Title to the blocked property remains with the target, but the exercise of powers and privileges normally associated with ownership is prohibited without authorization from OFAC. Blocking immediately imposes an across-the-board prohibition against transfers or dealings of any kind with regard to the property.
Who must comply with OFAC regulations?
All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches. In the cases of certain programs, such as those regarding Cuba and North Korea, all foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S. origin goods to comply.
How much are the fines for violating the OFAC regulations?
The fines for violations can be substantial. Depending on the program, criminal penalties can include fines ranging from $50,000 to $10,000,000 and imprisonment ranging from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $11,000 to $1,000,000 for each violation.
Is there a mechanism for a company to report its past undetected violations of OFAC regulations for completed transactions? Is any type of “amnesty” available for inadvertent failure to comply prior to the company becoming aware of the OFAC regulations?
Yes, a company can and is encouraged to voluntarily disclose a past violation. Self-disclosure is considered a mitigating factor by OFAC in Civil Penalty proceedings. A self-disclosure should be in the form of a detailed letter, with any supporting documentation, to R. Richard Newcomb, Director, Office of Foreign Assets Control, U.S. Department of the Treasury, 1500 Pennsylvania Ave., N.W., Washington, DC 20220. OFAC does not have an “amnesty” program. The ramifications of non-compliance, inadvertent or otherwise, can jeopardize critical foreign policy and national security goals. OFAC does, however, review the totality of the circumstances surrounding any violation, including the quality of a company’s OFAC compliance program.